‘Jessica’ a Case History: Consumer Proposal for a Professional
When she first contacted David Sklar & Associates, Jessica (not her real name) was a single, 28 year old, Toronto professional – whose career and future was threatened by her out-of-control personal finances.
At 24, Jessica had graduated with a Bachelor of Commerce degree. After a six-month job search, she found an entry-level position in her chosen field, paying $22,000 per year. By that time, she had amassed $12,000 in Student Loans, $7,000 in credit card debt, and owed her older brother $11,000.
During her first year of employment, Jessica was able to get an unsecured, $20,000 loan from her bank – which she used to pay off her credit cards and her brother. Unfortunately, she continued to use her credit cards and live beyond her means.
At work, Jessica performed well and her income increased to $25,000 per year. However, her personal finances were a mess – she missed payments and she began to receive collection calls at work. Jessica’s manager spoke to her about the collection calls. He advised her that having out-of-control personal finances would lead others to question her ability to manage business finances.
Desperate to fix the problem, Jessica approached her bank for a consolidation loan but was turned down. When she spoke with the credit card companies, they would not negotiate with her. She called her brother for a loan, but he suggested that she speak with a Licensed Bankruptcy Trustee instead.
A Bankruptcy would make Jessica unemployable in her chosen field. Worried that she might not be able to continue in her profession, but not knowing what else to do, she took her brother’s advice and called David Sklar & Associates Inc (DSAI) for an appointment.
At her initial consultation with DSAI, Jessica carefully reviewed her financial situation with Estate Administrator, Jason Sklar – the highlights of which were:
|Unsecured Bank Loan||$19,000|
|Credit Card Debt||$7,500|
When Jason discussed all of her options, Jessica was relieved to find out that a Consumer Proposal would:
- stop the collection calls,
- reduce her debt load, and
- NOT put her into Bankruptcy.
Working with Jessica, Jason prepared her Consumer Proposal, which DSAI then registered with the Office of the Superintendent of Bankruptcy; presented the terms to her creditors; and received creditor acceptance.
Jessica’s Proposal was to run for 60 months, during which time she would pay $275/month to DSAI, who would distribute the payment in accordance with the Proposal. At the end of the 60 months, if Jessica honoured the agreement, she would be freed of the debts covered by the Proposal (excluding the Student Loans*).
Although Jessica was familiar with business budgets, and had toyed with personal budgets in the past – she discovered that the process of creating a realistic and liveable budget with Jason, enabled her to understand how she could succeed.
It should be noted that attending two financial counselling sessions are a mandatory requirement in the administration of a consumer proposal.
During her initial credit counselling session, Jessica announced that she had become engaged but was worried that her spending issues might mean problems in the future. Jason suggested the couple create an extremely-limited budget for their wedding and stick to it. Past experience had shown Jason that couples who began their marriage in a financially responsible way and continued to keep a family budget, stood a better chance of financial success.
Although Jason did not receive an invitation to Jessica’s very small and budget-wise wedding – he heard all about it at their next credit counselling session. During that meeting, Jessica also shared details on the family budget her and her new husband had set up and were following.
At the end of 60 months, having honoured all the terms of her Proposal, Jessica was released from the unsecured debt covered by the Proposal (except the Student Loans*). She and her husband were then able to move on to the next phase of their marriage – confident in their ability to manage their finances.
*Due to the unique legal nature of Student Loans and the specifics of Jessica’s case – while the Student Loans would receive a portion of the $275 monthly payments, at the end of the Proposal, Jessica would still be required to pay back the balance owing on the Student Loans after any dividends they had received during the term.
To protect our client’s privacy, details of this case have been altered.